Friday, January 05, 2007

The Myth of Income Inequality

Don't look now, but before the Democrats try to trot out the class warfare rhetoric in favor of tax increases and onerous new restrictions on business, everyone might want to take a look at the facts: Contrary to the typical lefty talking points, the famous gap between rich and poor isn't actually growing all that fast.

3 Comments:

Put simply, if the Gini index is zero, it means that all wealth is shared equally. If the Gini index is 1, it means that all wealth is owned by one person. The higher the number, the more wealth is owned by less people.

According to the CIA world factbook, the USA has a Gini index of 0.45. Most European nations are between 0.25 and 0.35. Very high Gini indexes are also found in 2nd and 3rd world nations.

In that sense, the US is quite unequal in its distribution of wealth compared to the developed world.

Unlike almost every other country in the world, there is no real restriction on upward mobility in the US. It frequently takes a generation or so, however. Lets look at the success stories: The Italians, The Irish, The Poles, The Jews. In each of these groups, every generation moved upward till they were indistinguishable from all other middle class Americans.

But they were White? What about those who don't speak English?

OK, In NYC, as a child, The Puerto Rican immigrants were NYC's underclass. They were "All criminals". "They should go back where they came from". Today Puerto Rican's are totally mainstream in the US.

There's a secret formula to this - Parents driving their children to get an education. The lure of the American Middle Class is the most potent weapon in our vast arsenal.

The best I can figure out, my calc is very weak, the Gini index looks at the distribution of wealth over a population.

For instance In a country where much of the wealth is owned by 401K's and 403B's, how is that included? Are we including US securities owned by foreign residents? How about multinational companies - how do we include the wealth that they supply this country?

I admit to being prejudiced in this one, but isn't this just another attempt to qualtify qualidiable data? How do you measure wealth?